Why is income replacement planning important?

Your family would have had a proper lifestyle set which, with time, becomes your comfort zone. This lifestyle, in one way or other, is linked to the income of the breadwinner. And this lifestyle includes home loans, annual school fees of children, day to day living expenses and other monthly commitments.

In the absence of the insured, or in case of his/her unfortunate death, the family is left with no direction of how to manage things financially. With this in mind, income replacement plans have been put in action to take care of the family and its needs.

What are the benefits of this plan?

The benefits of the insurance plan, wither monetary or otherwise, will be available to be claimed by the dependants of the insured, irrespective of whether insured is alive or not. The most important feature of this insurance plan is that the benefits of the plan after the insured’s demise, is split into 2 parts – One time pay out as a lump amount and the rest is planned such that the family receives the payment as monthly income for the next one or two decades.

In other words, the full assured sum is broken into a one-time payment and continued monthly financial support which is received every month. It is also interesting to note that the total sum received by the beneficiary family over the specified period of time, is more than that of what was mentioned and assured initially in the policy.

What are the advantages of Income Replacement plans?

  • Affordability – There are plenty of plans and policies that are available for the customers varying in the premium that is paid in consistent periods. People have the choice of choosing a policy that is affordable according to their financial capacity and plan their future.
  • Income replacement plans give the insured or the beneficiaries enough time to plan their next course of action since lack of awareness is a common tendency among people. This feature comes in handy when the family or dependants prefer to have the benefits of the insurance paid to them monthly to replace the money earned by the insured.
  • The facility of getting their assured amount on a monthly basis leaves them in their comfort zones and don’t have to look for ways to use the lump sum or invest elsewhere.
  • This feature of monthly payment of assured amount for about a decade or two gives the family or dependants enough time to arrange for other sources of income or an alternate plan to invest their lump sum that they received from the insurance claim.

Why are term plans beneficial and why should it be preferred?

  • It is completely a protection insurance and so people do not need to worry about the maturity benefits.
  • The only thing to be taken seriously is that this insurance plan gives you clarity about the benefits and you just need to stay committed to the plan to secure your family’s future.
  • Pay out options are spread over a long period of time which is paid every month, makes it easy for the family to meet expenses even in the absence of the policy holder. This option also makes sure the family has found a proper replacement to the money that the insured was earning.
  • Income replacement plans are life protection plans which can be availed to secure your family and its future at very low premium rates.
  • These plans are available and generally purchased online, which makes it easy to procure and go by the procedure.

How to manage the benefits received from the insurance claim?

People are mostly unaware of financial investments or planning when it comes to putting the insurance claim to good use. They are confused and clueless as to what to do with the monetary benefits received from the income replacement plan after the insured’s demise. There are couple of options which are, either the family can use the fraction of the one-time payment, every month till it runs out. Or they can find a way to channelize or invest the lump amount efficiently.

Usually, the buck stops at only one point – planning and securing the family with income replacement plans is not enough. Leaving behind a huge monetary support is only a part of the story and the rest depends of how efficiently the family manages the money. It has been made clear that awareness about financial planning is very significant and that people should have prior knowledge as to where to invest the money and how.